Flipkart’s largest unit posts hefty revenue growth, cuts losses

Flipkart India Pvt Ltd, the largest unit of India’s biggest e-commerce marketplace, was able to increase revenues by 43 per cent and cut losses by over 34 per cent in the financial year 2015-16 as investors began to mount pressure to see tangible results.

The Flipkart unit posted a revenue of Rs 13,177 crore for the 12 months that ended March 2016, compared to the Rs 9,226 crore in revenue it posted in the year ago period. Losses shrunk to Rs 544.6 crore, from Rs 826.7 crore in the corresponding periods, according to regulatory documents filed by the company.

While losses for its cash-and-carry business were down, it was offset by the higher losses posted by Flipkart’s marketplace arm, bringing the total loss of the company to Rs 2,850 crore. The combined revenue for the two units stood at Rs 15,129 crore for the financial year.

Flipkart has set up a complex holding structure, with several entities listed in Singapore, making it hard to ascertain the exact revenue and loss figures.

Despite hefty growth in revenues in the previous financial year, investors continued to punish Flipkart’s valuation. After a series of markdowns by mutual fund investors, Morgan Stanley set a valuation of just $5.58 billion for the three months that ended September. Flipkart had enjoyed a peak valuation of $15.2 billion, making it among the top valued start-ups in the world.

With increasing competition from rival Amazon and an inability to curb losses, Flipkart has seen its value erode, making it harder for the company to raise fresh funds at a valuation it wants. Large investors such as Walmart – Amazon’s arch nemesis in the US – are said to have walked away from investing in the company after being unable to settle on a price agreed upon by both parties.

Flipkart stated that while there were losses, revenue growth was strong and that it’s cash-and-carry business would turn profitable with scale. “Though there are losses in the year, there is a significant increase in the revenue from operations and your directors see huge potential in the overall market,” the company said in the documents, according to a Mint report.

Since taking over as CEO early last year, Binny Bansal has been working to reduce losses at Flipkart and recently made a claim that the company will reduce cash burn by half in the coming months. This has been made possible with an increased push to improve margins, especially from its fashion units Myntra and Jabong, and also cut massive employee costs by rationalising its top management team.

Any reduction in losses could mean the return of investor confidence, something Flipkart needs badly if it is to take on Amazon’s onslaught. The Seattle-based company doubled its losses in the financial year 2015-16 as it beat Indian rival Snapdeal and played catch up with Flipkart. Amazon’s losses are expected to swell to $1 billion in the current financial year.